Dear All,
We all know that in EFP Basic and other components excluding HRA needs to be considered @ 12%.
Can anyone put some lights the conveyance allowance fixed at different amount as per Grades and Defray Allowance should also be considered in the EPF Calculation?
Also Retaining allowance what all things are included in this particular Heading?
Thank you very much.
Regards,
SN
From India
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1We all know that in EFP Basic and other components excluding HRA needs to be considered @ 12%.
Can anyone put some lights the conveyance allowance fixed at different amount as per Grades and Defray Allowance should also be considered in the EPF Calculation?
Also Retaining allowance what all things are included in this particular Heading?
Thank you very much.
Regards,
SN
From India
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The Employee Provident Fund (EPF) in India is calculated based on the basic salary and dearness allowance (if any) at a rate of 12%. Other allowances, such as Conveyance and Defray Allowance, are typically not included in the calculation of the EPF.
Conveyance Allowance: This is an allowance paid by the employer to cover the travel expenses of the employee from home to work and vice versa. The amount can vary based on the grade or level of the employee in the organization. As per the EPF Act, 1952, conveyance allowance is not a part of the basic wages and hence it is not considered for EPF calculation.
Defray Allowance: This is usually an allowance given to employees for expenses incurred in the performance of duties. The treatment of Defray Allowance in EPF calculation would depend on the nature and conditions of this allowance, but it is generally not considered for EPF calculation.
Retaining Allowance: Retaining Allowance is an allowance paid to an employee to retain them in the service of the employer. The components included in the Retaining Allowance can vary from organization to organization and are typically determined based on the terms of employment. However, as per the EPF Act, Retaining Allowance is considered as part of basic wages and hence should be considered for EPF calculation.
It is always recommended to check with a local labor law advisor or the EPFO to get the most accurate information as the interpretation of these laws can vary.
From India, Gurugram
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Conveyance Allowance: This is an allowance paid by the employer to cover the travel expenses of the employee from home to work and vice versa. The amount can vary based on the grade or level of the employee in the organization. As per the EPF Act, 1952, conveyance allowance is not a part of the basic wages and hence it is not considered for EPF calculation.
Defray Allowance: This is usually an allowance given to employees for expenses incurred in the performance of duties. The treatment of Defray Allowance in EPF calculation would depend on the nature and conditions of this allowance, but it is generally not considered for EPF calculation.
Retaining Allowance: Retaining Allowance is an allowance paid to an employee to retain them in the service of the employer. The components included in the Retaining Allowance can vary from organization to organization and are typically determined based on the terms of employment. However, as per the EPF Act, Retaining Allowance is considered as part of basic wages and hence should be considered for EPF calculation.
It is always recommended to check with a local labor law advisor or the EPFO to get the most accurate information as the interpretation of these laws can vary.
From India, Gurugram
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For the purpose of EPF contribution, all fixed components of salary as per contract of employment should be considered. HRA as a compensatory allowance only can be excluded. A compensatory allowance means an allowance paid to an employee to compensate a cost. As such if an employee is residing in a least accommodation in order to come to the office, then only the HRA can be excluded. But as the term HRA is used in the exclusion part of the definition of wages, it is usually considered as excluded from the PF contributing wages.
Conveyance allowance, on the other hand, is not found excluded from the wages, and therefore, it should be part of wages for contributing PF.
Retaining allowance is salary only. It is not paid as a component of salary to employees of an establishment which is running as but it is paid to the employees of an establishment which is not presently operational. Such establishment will not pay wages to its employees. At the same time they would like that some of the employees would be called back when the operations resume. In order to 'retain' them and avoid them from joining other establishments, they will pay salary every month and that salary is called retaining allowance. Normally, PF is paid on that wages which is earned by the workers while on duty. That is why PF is not attracted on leave encashment or retrenchment compensation paid. But retaining allowance is considered as wages and PF is also payable on that wages even though the workers earn them without working.
In short, PF is payable on total wages except HRA. But in order to reduce the burden of PF if you structure your salary in such a way that the HRA is abnormally big in value, then the EPFO will certainly ask whether HRA is paid to all employees or is it paid only to those employees who are residing in leased houses or not. In order to qualify for exclusion similar allowance should not be available to the spouse of the employee also. It is also a common finding that an employee who is paid minimum wages , say Rs 15000 or less than that, will not be paid any compensatory allowance like HRA. Therefore, if your wages is less than Rs 15000, it is not at all wise to have HRA as a component of salary.
From India, Kannur
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Conveyance allowance, on the other hand, is not found excluded from the wages, and therefore, it should be part of wages for contributing PF.
Retaining allowance is salary only. It is not paid as a component of salary to employees of an establishment which is running as but it is paid to the employees of an establishment which is not presently operational. Such establishment will not pay wages to its employees. At the same time they would like that some of the employees would be called back when the operations resume. In order to 'retain' them and avoid them from joining other establishments, they will pay salary every month and that salary is called retaining allowance. Normally, PF is paid on that wages which is earned by the workers while on duty. That is why PF is not attracted on leave encashment or retrenchment compensation paid. But retaining allowance is considered as wages and PF is also payable on that wages even though the workers earn them without working.
In short, PF is payable on total wages except HRA. But in order to reduce the burden of PF if you structure your salary in such a way that the HRA is abnormally big in value, then the EPFO will certainly ask whether HRA is paid to all employees or is it paid only to those employees who are residing in leased houses or not. In order to qualify for exclusion similar allowance should not be available to the spouse of the employee also. It is also a common finding that an employee who is paid minimum wages , say Rs 15000 or less than that, will not be paid any compensatory allowance like HRA. Therefore, if your wages is less than Rs 15000, it is not at all wise to have HRA as a component of salary.
From India, Kannur
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SALARY CAN BE SPLIT INTO COMPONENTS BUT NOT LESS THAN THE MINIMUM WAGES.docx
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(Fact Checked)-Your explanation on EPF, its inclusion, and exclusion is quite comprehensive. The point about the conveyance allowance and retaining allowance being part of EPF is accurate. (1 Acknowledge point)